Dell Reports First Quarter Financial Results

GAAP Earnings of $0.36 per share, non-GAAP earnings was $0.43 per share

Dell Enterprise Solutions and Services revenue grew 2 percent year over year to $4.5 billion

Dell announced its fiscal 2013 first quarter results today, continuing to show progress in its move to being a total enterprise services and solutions provider. Revenue for the quarter was $14.4 billion, with GAAP operating income of $824 million, and earnings of $0.36 per share.

“We’re committed to continuing our strategy to re-shape Dell’s business as an end-to-end IT provider,” said Michael Dell, chairman and CEO. “We saw continued progress in our first quarter with the innovative IT solutions we’re providing – notably our latest Dell servers, storage, networking and services that deliver customers enhanced productivity.”

“We continued to shift the mix of our business during a challenging environment,” said Brian Gladden, Dell chief financial officer. “Our enterprise solutions and services businesses now account for 50 percent of our gross margin, and we’ll continue to make the necessary investments to maintain our progress.”

Results

Revenue in the quarter was $14.4 billion, a 4 percent decrease from the previous year.

GAAP earnings per share in the quarter was 36 cents, down 27 percent from the previous year; non-GAAP EPS was 43 cents, down 22 percent.

GAAPoperating income for the quarter was $824 million, or 5.7 percent of revenue. Non-GAAP operating income was $1 billion, or 7 percent of revenue.

Cash used in operations in the quarter was $138 million. For the past four quarters, Dell has generated $4.9 billion in cash flow. Dell ended the quarter with $17.2 billion in cash and investments.

Fiscal-Year 2013 First Quarter Highlights

First Quarter

(in millions)

FY13

FY12

Change

Revenue

$14,422

$15,017

(4)%

Operating Income (GAAP)

$824

$1,212

(32)%

Net Income (GAAP)

$635

$945

(33)%

EPS (GAAP)

$0.36

$0.49

(27)%

Operating Income (non-GAAP)

$1,010

$1,376

(27)%

Net Income (non-GAAP)

$761

$1,050

(28)%

EPS (non-GAAP

$0.43

$0.55

(22)%

Information about Dell’s use of non-GAAP financial information is provided under “Non-GAAP Financial Measures” below. Non-GAAP financial information excludes costs related primarily to the amortization of purchased intangibles, severance and facility-action costs, a merger termination fee, certain settlement costs and acquisition-related charges. All comparisons in this press release are year over year unless otherwise noted.

Large Enterprise revenuewas $4.4 billionin the quarter, a 3 percent decline. Operating income for the quarter was $402 million, or 9.1 percent of revenue.

Public revenue was $3.5 billion, a 4 percent decrease. O perating income for the quarter was $271 million, or 7.8 percent of revenue.

Small and Medium Business revenue grew 4 percent to $3.5 billion. Enterprise Solutions and Services revenue increased 17 percent, led by services revenue growth of 23 percent and servers and networking of 16 percent. SMB had $389 million in operating income, or 11.2 percent of revenue.

Consumer revenue was $3 billion, a 12 percent decline. Operating income was $32 million or 1.1 percent of revenue.

Asia-Pacific and Japan revenue was flat but China increased 9 percent. EMEA revenue was down 1 percent in the quarter. Americas was down 7 percent. Revenue in the BRIC countries increased 4 percent.

Company Outlook:

The company expects second quarter revenue to be in line with historical seasonal trends and be up 2-4 percent from first-quarter levels.

About Dell

Dell Inc. (NASDAQ: DELL) listens to customers and delivers worldwide innovative technology, business solutions and services they trust and value. For more information, visit www.dell.com. As previously announced, the first-quarter a nalyst call with Michael Dell, chairman and CEO; Brian Gladden, CFO; and, Steve Felice, Chief Commercial Officer, will be webcast live today at 4:00 CDT and archived at www.dell.com/investor. To monitor highlighted facts from the analyst call, follow on the Dell Investor Relations Twitter account at: http://twitter.com/dellshares or hashtag #DellEarnings. To communicate directly with Dell, go to www.dell.com/dellshares.

Segment Realignment:

In the first quarter of Fiscal 2013, Dell made certain segment realignments in order to conform to the way Dell internally manages segment performance. These realignments affected all of Dell's operating segments, but primarily consisted of the transfer of small office business customers from the Small and Medium Business segment to the Consumer Segment. Dell has recast prior period amounts to provide visibility and comparability. None of these changes impacts Dell's previously reported consolidated net revenue, gross margin, operating income, net income, or earnings per share.

Non-GAAP Financial Measures:

This press release includes information about non-GAAP operating income, non-GAAP net income, and non-GAAP earnings per share (collectively with non-GAAP gross margin and non-GAAP operating expenses, the “non-GAAP financial measures”), which are not measurements of financial performance prepared in accordance with U.S. generally accepted accounting principles. In the following tables, Dell has provided a reconciliation of each historical non-GAAP financial measure to the most directly comparable GAAP financial measure under the heading “Reconciliation of Non-GAAP Financial Measures” and has presented a detailed discussion of its reasons for including the non-GAAP financial measures and the limitations associated with those measures under the heading “Use of Non-GAAP Financial Measures.” Dell encourages investors to review the reconciliation and the non-GAAP discussion in conjunction with Dell’s presentation of these non-GAAP financial measures.

Special Note on Forward Looking Statements:

Statements in this press release that relate to future results and events (including statements about Dell’s future financial and operating performance, trends relating to mix shift, macroeconomic uncertainty, organic and inorganic investments and success relating to strategic transformation, as well as the financial guidance with respect to cash flow from operations, net income and non-GAAP earnings per share) are forward-looking statements and are based on Dell's current expectations. In some cases, you can identify these statements by such forward-looking words as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “confidence,” “may,” “plan,” “potential,” “should,” “will” and “would,” or similar expressions. Actual results and events in future periods may differ materially from those expressed or implied by these forward-looking statements because of a number of risks, uncertainties and other factors, including: intense competition; Dell’s reliance on third-party suppliers for product components, including reliance on several single-sourced or limited-sourced suppliers; Dell’s ability to achieve favorable pricing from its vendors; weak global economic conditions and instability in financial markets; Dell’s ability to manage effectively the change involved in implementing strategic initiatives; successful implementation of Dell’s acquisition strategy; Dell’s cost-efficiency measures; Dell’s ability to effectively manage periodic product and services transitions; Dell’s ability to deliver consistent quality products and services; Dell’s ability to generate substantial non-U.S. net revenue; Dell’s product, customer, and geographic sales mix, and seasonal sales trends; the performance of Dell’s sales channel partners; access to the capital markets by Dell or its customers; weak economic conditions and additional regulation affecting our financial services activities; counterparty default; customer terminations of or pricing changes in services contracts, or Dell’s failure to perform as it anticipates at the time it enters into services contracts; loss of government contracts; Dell’s ability to obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms; infrastructure disruptions; cyber attacks or other data security breaches; Dell’s ability to hedge effectively its exposure to fluctuations in foreign currency exchange rates and interest rates; expiration of tax holidays or favorable tax rate structures, or unfavorable outcomes in tax audits and other compliance matters; impairment of portfolio investments; unfavorable results of legal proceedings; Dell’s ability to attract, retain, and motivate key personnel; Dell’s ability to maintain strong internal controls; changing environmental and safety laws; the effect of armed hostilities, terrorism, natural disasters, and public health issues; and other risks and uncertainties discussed in Dell’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for its fiscal year ended February 3, 2012. In particular, Dell’s expectations with regard to cash flow from operations, net income and non-GAAP earnings per share for the full fiscal year ending Feb. 1, 2013 assume, among other matters, that there is no significant decline in economic conditions generally or demand growth specifically, that macroeconomic uncertainties do not materialize into significant economic difficulties, no significant change in product mix patterns, and continued geographic customer demand trends. In particular, Dell’s expectations with regard to second quarter revenue amounts assume, among other matters, that there is no significant decline in economic conditions generally or demand growth specifically, that macroeconomic uncertainties do not materialize into significant economic difficulties, no significant change in product mix patterns, and continued geographic customer demand trends. Dell assumes no obligation to update its forward-looking statements.

Consolidated statements of income, financial position and cash flows and other financial data follow.Dell is a trademark of Dell Inc. Dell disclaims any proprietary interest in the marks and names of others.